What is the alternative to fossil fuels?
As climate change moves to the top of the agenda, fossil fuels companies are under attack but what is the answer in a world that relies on gas and electricity?
Forget arms dealers and tobacco traders. The fossil fuels industry is shaping up as a new pariah, charged with crimes that put those of its predecessors into dramatic perspective. Oil, gas and coal companies stand accused of causing the destruction of planet Earth through the role of their products in fostering climate change.
As Oscar-winning actor Sir Mark Rylance declared when resigning from the Royal Shakespeare Company (RSC) this summer in protest at the organisation’s BP sponsorship: ‘l do not wish to be associated with BP any more than I would with an arms dealer, a tobacco salesman or anyone who wilfully destroys the lives of others alive and unborn.’
The RSC later ended the BP deal, saying it put a barrier between the company and young people. However, is the accusation fair? Do fossil fuel producers really deserve to be ranked alongside pariahs whose products kill and harm people?
Yes, says the Carbon Divestment Campaign(CDC), a movement set up in the US in 2012 by Bill McKibben, co-founder of climate campaign group350.org. Inspired by the success of campaigns that tarred the reputations of companies associated with South Africa’s former apartheid regime, the group’s Go Fossil Free has persuaded organisations, ranging from Norway’s sovereign wealth fund to half the UK’s higher education institutions, to cut financial ties with fossil fuel companies.
The problem for these companies now is not how they get out of fossil fuels but how they manage that transition
350.org says the number of institutional investors committed to cutting fossil fuel stocks from their portfolios has risen to more than 1,100 from 180 in 2014, one year before the Paris Accord on combatting climate change. Assets under management by investors which have shed their fossil fuel holdings increased over this period from $52 billion to more than $11 trillion. (That headline figure, however, is not the money that has been withdrawn and can be misleading. For example, it includes Norway’s $1 trillion fund, even though the sovereign fund’s total divestment from oil and gas is just $7.5 billion.)
And last year, the Republic of Ireland passed a bill requiring the country’s national investment fund to divest its fossil fuels holdings ‘as soon as is practicable’. It is expected that its €300 million holdings in 150 companies will be shed over the next five years.
Robert Blood, founder of activism tracking agency Sigwatch, explains: ‘What has changed is the realisation that climate change is a global game-changer. The idea is to create such opprobrium against fossil fuels that the world takes action. The problem for these companies now is not how they get out of fossil fuels but how they manage that transition.’
Most energy companies are taking some action. Drax Power, once Europe’s biggest carbon dioxide emitter, has switched four of the six turbines at its massive Selby power station, responsible for up to ten per cent of electricity sent to the Grid each year, from coal to renewable wood pellets. BP says it is committed to a ‘global energy transition’ to a low-carbon future,’ investing $500 million of its $15 billion to $16 billion capital investment programme in renewable energy.
It recently bought a $200 million stake in Lightsource, Europe’s biggest solar power developer. Royal Dutch Shell, meanwhile, has bought a Dutch car-charging network, partnered with electric car charging firm Ionity, acquired power supplier First Utility and pledged to halve the emissions intensity of its products by 2050. However, actions have not been consistent, with BP closing its alternative energy headquarters soon after the 2009 financial crash and Shell halting investments in wind and solar power.
According to climate change lobbying group Carbon Tracker, oil majors have invested $50 billion in new reserves since the beginning of 2018 but none are on track to meet the Paris Accord’s target of keeping global warming ‘well below’ a two degree increase from pre-industrial levels and making efforts to restrict it further to a 1.5C rise. The sustainability community is predictably outraged.
‘Why are people who make and use fossil fuels being demonised?’ asks Valerie Keller, the former director of accountancy group EY who has co-founded sustainability consultancy Imagine with former Unilever chief executive Paul Polman. ‘It’s super-normal. Humans don’t react well when a small group of us physically harms the rest of us. We survived millennia by protecting the majority of our species from a few bad actors. We also evolved to believe science, rather than blindly swallowing myths and propaganda.
‘So we’ve woken up and the maths doesn’t add up. What happens if we stay carbon junkies? It’s terrifying. It’s not the planet we need to save. It’s human life as we know it, if we don’t reverse course.’
Divestment, to date, probably has reduced about zero tonnes of emissions
Many investors take a more conservative view. The Church of England, for example, remains invested in many oil companies, despite selling out of tar sands oil and thermal coal in 2015. From next year, it will begin selling shares in companies deemed to not be taking their climate change responsibilities seriously and from 2023 it will divest from fossil fuel producers who are not prepared to align their businesses with the Paris Accord’s 2C goal.
Head of financial communications Mark Arena says a consensual approach is preferred. ‘Our active engagement and voting record provide greater leverage and influence than we could ever hope to achieve by acting alone or by simply selling our holdings,’ he states. Japan’s $1.3 trillion national pension fund takes a similar approach, believing it is better to stay invested and push companies to change business practices.
Billionaire philanthropist Bill Gates meanwhile warned recently that climate activists are wasting their time lobbying investors to ditch fossil fuel stocks, saying they would do better supporting disruptive technologies that slow carbon emissions and help people adapt to a warming world. ‘Divestment, to date, probably has reduced about zero tonnes of emissions,’ he said. With trillions of dollars still invested in fossil fuels, there’s certainly a long way to go.
‘It’s been moderately successful,’ says Blood. ‘But the problem is that fossil fuels are far more embedded in the global economy than FW de Klerk’s South Africa was in the 1990s. It’s quite a tall order. Carbon dioxide is a product of life. If the investment community is taking climate change seriously, it should be divesting from users of carbon, as well as producers of fossil fuels. But will big oil become like big tobacco? No. I don’t think that’s ever going to happen. Energy companies do not have to stay in fossil fuels to be energy companies, while tobacco companies by definition have to be tobacco companies. And fuel is not a purchase of choice, given the way that the global economy works. You would have to replace one type of energy with another form.’
Consultant David Vigar, formerly editor-in-chief of BP’s global websites and magazines, agrees. ‘I can’t buy the idea that oil and gas are as morally questionable as tobacco, given that oil and gas are used by practically every member of the world’s population,’ he says. ‘Oil and gas are what we’ve used since the industrial revolution, believing them to be okay for most of that time. As long as we’re all using the stuff, it doesn’t feel quite right be saying that it’s an evil thing. My challenge to people who think it is on the same level as tobacco is to try to do without it because they would be living in a field without electricity and mobility, with a life expectancy a lot lower than it is now.’
Some oil and gas companies are trying to articulate a response. ‘For us to say we will sacrifice today’s margin for the sake of tomorrow; there is not such a simple trade-off,’ Shell’s projects and technology director Harry Brekelmans told a recent conference organised by consultancy Xynteo. ‘For us to be able to create the capabilities to be successful in the future, we need to invest. That money will only be there if we actually enjoy a margin in some parts of our business. It’s a crime to make something that’s very complex simple. You shouldn’t try. You should look for the better solution.’
In the supply chain, Ikea, a major retailer of petroleum-derived plastic products has declared that its global operations will be free of fossil fuels by 2030. The retailer’s parent company Ingka Holding has invested €2.5 billion in solar and wind energy systems over the last decade to power its global operations, while all the company’s home delivery vehicles will switch to electric power.
‘We do this because we believe in it and are convinced that our customers will deselect us if we are not a good company,’ says chief executive Jesper Brodin. ‘But the main reason we are doing this is that we can only exist as a business model tomorrow if we are sustainable. It’s the only way we can be a low-cost company.’
Perhaps lessons can be learned from how other ‘pariahs’ have dealt with their issues. Drax Group says it switched raw materials after thoroughly reviewing alternatives. It then set out to tackle the issue in a focused and transparent way, confronting critics head on and investing in internal communications to support workers, who were getting criticised for their association with their employer.
‘There’s a natural human reaction to hunker down, batten down the hatches and hope that the storm blows away,’ says the company’s former corporate affairs director Andrew Brown. ‘But the big societal challenge of climate change isn’t going anywhere so you have to have dialogue. And if someone has their facts wrong, you have to engage with them and correct the falsehood. You don’t always have to just take it.’
In defence, Charlotte Lambkin says she encountered conscious and unconscious biases in her former role as communications director at defence company BAE Systems. She explains: ‘You have to engage, engage and engage. The worst thing you can do is shut down. You have to accept that not everyone is going to like your company. I remember telling one campaigner You’re trying to make change happen the company from outside the company; I’m trying to make change happen from within. We both have a job to do.’
In tobacco, Philip Morris International has set itself apart by setting out to switch all its smokers to alternative products, such as vaping and ‘heat, not burn’ technologies. The strategy has been hit by moves to ban vaping products in the US after a number of deaths allegedly linked to vaping.
However, UK managing director Peter Nixon insists: ‘We’re taking a lead in attacking this problem. Overwhelming medical evidence says that alternative products are much better than smoking cigarettes for the health of consumers. Campaigning to persuade our customers to switch is the right thing to do.’
What else can fossil fuel companies do? Vigar believes the industry needs to get much better at lobbying governments. ‘We have to recognise that our society is centred on fossil fuels and we need to wean ourselves off them and vastly reduce our dependence on them,’ he says. ‘Companies across the energy world could do more to advocate for the actual solution, which is for governments, co-ordinated by the UN, to act to cut emissions faster.’
Blood also feels that the focus must be on alternatives, not a blame game. ‘The fact is that we need different types of energy,’ he says. ‘Smart oil and gas companies are planning their exit from oil and gas because virtually the entire world acknowledges that climate change is real and needs to be acted on. The only way to really act on it is to stop producing carbon dioxide.’